Eurozone recovery continues in November, attacks hit French services sector

Output in the Eurozone expanded at its fastest pace in over four years, figures released on Monday showed, but the terrorist attacks in Paris left an imprint on French services sector activity.

The Markit Eurozone composite purchasing managers’ index rose from 53.9 in October to 54.4, according to the preliminary ‘flash’ reading, indicating the fastest rate of expansion of output in manufacturing and services since May 2011 and beating analysts’ expectations for a 54.0 reading.

The sub-indices monitoring employment, new orders and backlogs of work all signalled the strongest monthly expansions in four and a half years, according to the survey compiler.

The service sector, where business activity and new business rose at the fastest rates since May 2011 and employment showed the biggest monthly gain for five years, continued to lead the recovery, while manufacturing output growth reached a three-month high amid the largest monthly improvement in order books since April of last year.

Among individual countries, growth accelerated to a three-month high in Germany on the back of the biggest monthly improvement in new business for two years, while business activity in France rose at the slowest rate in three months.

The composite PMI for the euro area´s largest economy jumped 0.7 points to 54.9 from 54.2 in the month before (consensus: 54.0).

“The improved performance in terms of economic growth and job creation seen in November are all the more impressive given last weekend’s tragic events in Paris, which subdued economic activity in France – especially in the service sector,” said Markit’s chief economist Chris Williamson.

However, Williamson added the recovery was unlikely to change the European Central Bank’s stance, given Mario Draghi other policymakers look intent to implement further stimulus measures next month.

French PMI falls unexpectedly

The French composite PMI retreated by 1.3 points to 53.1, led by a 1.4 point drop in the services PMI to 51.3. Some businesses reported the terrorist attacks had a negative impact on activity.

Nevertheless, a gauge of new business held at 52.5, a five-month high.

Commenting on the PMI data, Barclays said: "Our PMI-based GDP indicator [for the Eurozone] stands at 0.5% quarter-on-quarter, a touch above our 0.4% quarter-on-quarter growth forecast.

"But it is worth highlighting that risks are skewed to the downside, as intensified geopolitical tensions could dampen business and consumer confidence in the months ahead, hitting the main engine of the euro area recovery: private consumption."